Demonetisation 2016: What are the trends of counterfeiting notes in India over the years?

One major objective of Demonetisation 2016 is stopping counterfeiting notes. The question is do we have data etc which shows rising counterfeits? That too in high denom notes?

I dug up the data since 2001-02. The table shows the % ages of counterfeit notes across denoms:

%age distribution counterfeit notes

Rs 2 and 5

Rs.10

Rs.20

Rs.50

Rs.100

Rs.500

Rs.1000

Total

2001-02

–

0.47

0.06

2.4

53.9

43.1

0.0

100.0

2002-03

–

0.09

0.02

1.6

81.5

16.7

0.0

100.0

2003-04

–

0.04

0.03

2.3

88.9

8.7

0.1

100.0

2004-05

–

0.04

0.09

2.6

88.9

7.9

0.4

100.0

2005-06

–

0.06

0.27

4.8

84.4

9.7

0.7

100.0

2006-07

–

0.11

0.29

6.5

65.6

24.5

3.0

100.0

2007-08

–

0.05

0.18

4.1

56.3

34.1

5.2

100.0

2008-09

–

0.02

0.09

3.2

33.5

55.2

8.0

100.0

2011-12

–

0.02

0.04

2.4

23.7

57.9

16.0

100.0

2012-13

–

0.06

0.04

2.0

21.7

56.5

19.8

100.0

2013-14

–

0.03

0.02

1.4

24.3

51.7

22.5

100.0

2014-15

–

0.05

0.02

1.2

30.6

46.1

22.1

100.0

2015-16

–

0.02

0.02

1.0

35.0

41.3

22.6

100.0

We see differences across denominations:

In Rs 1000, we see rise in number of counterfeit notes every year. Its share in total number of counterfeit notes rises from 0.1% in 2002-03 to 22.6% in 2015-16

In Rs 500 it was at 43% in 2001-02 which declined to 7.9% in 2004-05 on account of some security measures (will try cover these measures in later post). And since then it rose to 58% in 2011-12 and has declined to 41% in 2015-16.

Interestingly, in early oughties share of Rs 100 in counterfeit number was the highest. It went up till almost 90% in 2004-05 and then declined to 22% in 2012-13. It has risen in last few years to touch 35%. This is high number and govt could have demonetised it as well based on numbers and not values.

Let us look at values table now:

%age distribution counterfeit notes in value

Rs 2 and 5

Rs.10

Rs.20

Rs.50

Rs.100

Rs.500

Rs.1000

Total

2001-02

0.00

0.02

0.00

0.4

19.9

79.6

0.0

100.0

2002-03

0.00

0.01

0.00

0.5

49.1

50.3

0.1

100.0

2003-04

0.00

0.00

0.00

0.9

66.0

32.2

0.9

100.0

2004-05

0.00

0.00

0.01

1.0

66.4

29.5

3.1

100.0

2005-06

0.00

0.00

0.04

1.7

59.2

34.0

5.1

100.0

2006-07

0.00

0.00

0.03

1.5

29.6

55.3

13.6

100.0

2007-08

0.00

0.00

0.01

0.7

20.1

60.8

18.4

100.0

2008-09

0.00

0.00

0.00

0.4

8.6

70.6

20.5

100.0

2011-12

0.00

0.00

0.00

0.3

5.0

61.0

33.7

100.0

2012-13

0.00

0.00

0.00

0.2

4.3

56.2

39.3

100.0

2013-14

0.00

0.00

0.00

0.1

4.8

50.8

44.3

100.0

2014-15

0.00

0.00

0.00

0.1

6.3

47.8

45.8

100.0

2015-16

0.00

0.00

0.00

0.1

7.5

44.1

48.3

100.0

As expected, both Rs 500 and RS 1000 capture much of the counterfeit value.

A more interesting table is to see the share of these counterfeit notes in total currency:

Rs 2 and 5

Rs.10

Rs.20

Rs.50

Rs.100

Rs.500

Rs.1000

Total

2001-02

0.000005

0.000009

0.00004

0.00057

0.00392

0.00002

0.00456

2002-03

0.000002

0.000002

0.00005

0.00150

0.00189

0.00002

0.00129

2003-04

0.000001

0.000003

0.00007

0.00150

0.00072

0.00009

0.00087

2004-05

0.000001

0.000008

0.00008

0.00131

0.00047

0.00018

0.00068

2005-06

0.000001

0.000017

0.00011

0.00078

0.00033

0.00014

0.00042

2006-07

0.000002

0.000015

0.00012

0.00051

0.00057

0.00034

0.00047

2007-08

0.000001

0.000017

0.00015

0.00082

0.00127

0.00072

0.00095

2008-09

0.000001

0.000016

0.00026

0.00097

0.00356

0.00166

0.00230

2011-12

0.000001

0.000006

0.00036

0.00087

0.00294

0.00240

0.00236

2012-13

0.000001

0.000006

0.00028

0.00075

0.00262

0.00229

0.00215

2013-14

0.000001

0.000002

0.00020

0.00081

0.00221

0.00217

0.00194

2014-15

0.000001

0.000002

0.00021

0.00121

0.00209

0.00234

0.00201

2015-16

0.000000

0.000002

0.00017

0.00140

0.00167

0.00226

0.00181

The numbers show that share of total counterfeit notes as total currency in just about 0.02%. Within this, share of Rs 1000 notes is at 0.0022%.

These are really tiny tiny percentages and one wonders whether such a large scale demon exercise needed to be taken to remove these counterfeit notes. Even if the number of notes would have surged in last 6-8 months since the data, still it shall be highly insignificant.

One could have followed the simpler strategy used earlier. Earlier, the govt, stopped printing old notes and got the newer ones aggressively in the system. It asked the banks to keep bringing the older notes to RBI to cancel them. Or, it could have been a strategy as done two years ago where one gave a longer time for note exchange. Under this, the older notes would only work till this date which was a long period. Not like today, where notes were demonetised overnight and older notes could be used only in some select places which also stopped accepting them.

Thus, based purely on past trends and even current numbers, the case of counterfeit notes does not really explain the need for such a large-scale demon exercise.

4 Responses to “Demonetisation 2016: What are the trends of counterfeiting notes in India over the years?”

Amol, thanks for pulling the data, really makes us question the value of the whole exercise and the publicity surrounding it. I was trying to understand the source of your data, and whether it tallies with what RBI might have. Also would be good to understand if you thought the data was complete…how much do we not know about counterfeit extent?